Common Contracts

Background – Unitranche Financing Focus – Agreement Among Lenders Negotiating an Agreement Among Lenders

November 26th, 2018

• Filed
  November 26th, 2018

Whenever a borrower incurs debt under more than one facility, the parties to the credit transactions face the question of ranking the different facilities – which one will be repaid first, in the event the borrower cannot repay all of its debts? There are many circumstances under which it is appropriate or desirable to allocate different priority to different credit facilities. For example, an asset-based lender might be given priority over the pool of assets that it is primarily lending against – its borrowing base. Or higher- and lower-priority debt might be marketed to different segments of the financial markets, with different expectations and orientations along the risk/reward curve. Or a particular ranking within the borrower’s capital structure might be available, under existing contractual obligations, for the issuance of new debt, whether to raise cash or to use as currency in an exchange offer.